Computer Mediated Transactions. Hal Varian American Economic Review Presentation by: Paulo Albuquerque

Transcription

1 Computer Mediated Transactions Hal Varian American Economic Review Presentation by: Paulo Albuquerque

2 Summary Stage of Innovations Benefits of Computer Mediation New Forms of Contract Monitoring Data Extraction and Analysis Controlled Experimentation Personalization and Customization

3 Stage of Innovations Combinatorial Innovation The component parts of these technologies can be combined and recombined by innovators to create new devices and applications E.g., Internet and Web, with a huge number of novel applications, from web browsers, to search engines, to social networks Reason for rapid diffusion: the component parts were all bits! There was no time to manufacture, no inventory management, and no shipping delay Parallel invention: the web came from Switzerland, Linux from Finland, Skype from Estonia.

4 Facilitate new forms of contract E.g., Transportation industry: Car dealers are selling cars with starter interrupt" devices that inhibit operations if car payments are missed E.g., Computer mediated contracts: Video industry went from a fix fee to a share revenue system between video stores and distributors E.g., Online Advertising Impressions (banner ads) vs. Clicks The publisher wants to sell impressions The advertiser (manufacturer) wants to buy clicks (which lead to sales) Solution: find an exchange rate = clickthrough rate!

5 Monitoring Accounting has been in place since 3300 BC; use of small pebbles to represent shipments, put in a sealed envelop, and opened at the end to the trip Cash Register: invented in 1883, by James Ritty; avoid money being stolen by employees Computer: records everything!

6 Data extraction and analysis Better decisions and improve welfare (see the next two benefits) E.g., Airline reservations, which allows for price discrimination E.g., Supermarket scanner data E.g., Search engine data

7 Controlled Experimentation Cloud Computing: storing in one data center allows for experimentation, which is hard with packaged software When experiments are cheap, decisions can be based on results, instead of based on the Highest Paid Person's Opinion(HiPPO) E.g., in 2008, Google ran 6,000 experiments involving web search which resulted in 450 to 500 changes in the system tweaking everything from the background color of the ads, to the spacing between the ads and search results, to the underlying ranking algorithm E.g., Experimental platforms: Ad Rotation, Website Optimizer E.g., Bid Simulator and Bid Forecasting tools

8 Personalization and Customization Recommender Systems: based on monitoring and experiments Third Welfare Theorem (Varian, 2005): combining perfect price discrimination and free entry Perfect price discrimination results in the optimal amount of output being sold, while free entry pushes profits to zero, conferring all benefits to the consumers E.g., Amazon makes suggestions of things to buy based on your 12 previous purchases, or on purchases of consumers like you

9 Transactions Among Workers Knowledge Worker Productivity: Prior to the widespread use of the personal computer, office documents were produced via a laborious process: A memo was dictated to a stenographer, who later typed the document, making a half-dozen carbon copies. The typed manuscript was corrected by the author and circulated for comments. With the personal computer, editing became much easier, and the process of collaborative document production involved handing floppy disks back and forth. , eliminated the floppy disk and simply mail attachments from person to person Nowadays: Cloud Computing, where documents live in a cloud

10 Deployment of Applications Cloud Computing Offer both software as service and a platform as service E.g., a small company to purchase data storage, hosting services, an applications development environment, and Internet connectivity of the shelf from vendors such as Amazon, Google, IBM, Microsoft, Sun and others, turning a previous fixed cost into a variable cost, reducing entry barriers Micro-multinationals E.g., Amazon s Mechanical Turk, where workers are matched with tasks; in March 2007, there were 100,000 workers, from 100 countries providing services Brain Circulation (Saxenian, 2006): , webpages, wikis, etc..